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Post-Resolution Treatment of Depositors At Failed Banks: Implications for the Severity of Banking Crises, Systemic Risk, and too-Big-To-Fail

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  • Mr. George G. Kaufman
  • Mr. Steven A. Seelig

Abstract

Losses may accrue to depositors at insolvent banks both at and after the time of official resolution. Losses at resolution occur because of poor closure rules and regulatory forbearance. Losses after resolution occur if depositors' access to their claims is delayed or "frozen." While the sources and implications of losses at resolution have been analyzed previously, the sources and implications of losses after resolution have received little attention. This paper examines the causes of delayed depositors' access to their funds at resolved banks, describes how the FDIC provides immediate access, reports on a special survey of access practices in other countries, and analyzes the costs and benefits of delayed access in terms of both the effects on market discipline and depositor pressure to protect all deposits.

Suggested Citation

  • Mr. George G. Kaufman & Mr. Steven A. Seelig, 2001. "Post-Resolution Treatment of Depositors At Failed Banks: Implications for the Severity of Banking Crises, Systemic Risk, and too-Big-To-Fail," IMF Working Papers 2001/083, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/083
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    References listed on IDEAS

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    3. George G. Kaufman, 1990. "Are Some Banks Too Large To Fail? Myth And Reality," Contemporary Economic Policy, Western Economic Association International, vol. 8(4), pages 1-14, October.
    4. James R. Barth, 1991. "The Great Savings and Loan Debacle," Books, American Enterprise Institute, number 918256, September.
    5. Walker F. Todd, 1994. "Lessons from the collapse of three state-chartered private deposit insurance funds," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
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    Cited by:

    1. Eric Santor, 2003. "Crisis bancarias y contagio: evidencia empírica," Monetaria, CEMLA, vol. 0(3), pages 293-344, julio-sep.
    2. Eric Santor, 2003. "Banking Crises and Contagion: Empirical Evidence," Staff Working Papers 03-1, Bank of Canada.
    3. Marília Pinheiro Ohlson & Gerlando Augusto Sampaio Franco de Lima & Tony Takeda, 2021. "Deposit insurance and brokerage firms: impacts on the market discipline of the Brazilian banking industry," Working Papers Series 542, Central Bank of Brazil, Research Department.

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